Photo by N Kamalov
Every medical bill is a surprise, but a surprise medical bill is something very specific. It’s a bill for something your health insurance covers but, unfortunately, the doctor who performed the procedure is not in your insurance network.
Until Congress passed the No Surprises Act in late 2020, unexpected and exorbitant bills from out-of-network providers were common. They created huge medical debt for patients and drove families into bankruptcy. The legislation was successful in protecting patients, but the bills didn’t go away. The No Surprises Act set up a process that lets doctors and patients’ insurance companies negotiate over the out-of-network doctors’ bills. It hasn’t worked out well.
The law provides an opportunity for the provider and the insurer to work out a payment settlement. If they are unable to reach an agreement, the law includes a binding arbitration process, the Independent Dispute Resolution (IDR) process. After the provider and the insurer submit their best estimate of a fair price for the health service, the arbitrator picks one of these prices. The process has been contentious, with providers arguing that payers are lowballing their offers and payers complaining that arbitrators’ awards favor providers.
As I wrote in 2020, when the No Surprises Act was being debated, failing to make the median in-network rate the benchmark would lead to controversy and higher costs and premiums. And it has.
Gaming the Arbitration System
A report from the Brookings Institution examines the impact of the No Surprises Act, which went into effect on January 1, 2022, on average payments to out-of-network providers for specific health services — emergency care, imaging and neonatal/pediatric critical care. The report compares the payments to providers with the median in-network payment for the health service, known as qualifying payment amounts (QPAs). It also compares the payments with provider and insurer offers of their best estimates of a fair price for the service submitted to the arbitrator, all expressed as a multiple of what Medicare pays for the service. In most cases, the arbitrator chooses the price submitted by the provider: Providers won 81 percent of the time in emergency care, 91 percent of the time in imaging, and 80 percent of the time in neonatal/pediatric critical care.
The average arbitrator’s decision is a combination of provider wins and insurer wins. The high win rate for providers skews arbitrator decisions toward the provider offer:
-In emergency care, the QPA for emergency services was 174 percent of Medicare. Insurer offers averaged 232 percent of Medicare, provider offers averaged 565 percent of Medicare, and arbitrator decisions averaged 487 percent of Medicare.
-In imaging, the QPA was 153 percent of Medicare. Insurer offers averaged 262 percent of Medicare, provider offers averaged 847 percent of Medicare, and arbitrator decisions averaged 788 percent of Medicare.
-In neonatal/pediatric critical care, the QPA was 206 percent of Medicare, provider offers averaged 683 percent of Medicare, and arbitrator decisions averaged 603 percent of Medicare. No figure was provided for insurer offers.
A study in Health Affairs that examines arbitration decisions across all health services notes that when providers win, they often receive payments three to four times the QPA — the payment the typical in-network provider would have received. The authors quantify the costs to the health system in 2023 and 2024 by comparing arbitration awards to providers with the QPA for the services provided. Costs to the health care system include internal costs of providers and payers related to preparing for the arbitration, as well as administrative and IDR fees to cover administrative costs and finance the IDR system. Administrative fees to support government agencies involved in the process came to $228 million over the two years, IDR entity fees which support the arbitrators’ organizations came to $656 million, and internal administrative costs for providers and insurers to manage IDR disputes were $1.9 billion, Payment determinations by arbitrators over the two years exceeded the QPA by an estimated $2.4 billion. This is the excess over what the providers would have been paid if they had been in-network. It is possible to argue about whether in-network payments are fair, but this measures the added costs of payments to out-of-network providers. The total of these costs is just under $5 billion, or $2 to $2.5 billion a year.
The amounts are so high because of the massive number of claims brought by out-of-network providers. Between mid-2022 and May 2025, 3.3 million disputes were filed; 85 percent were resolved A handful of provider organizations are responsible for a preponderance of claims. Private equity-backed Radiology Partners and Team Health accounted for 43 percent of claims in 2023 and 2024. The top five provider organizations were responsible for 59 percent.
But things are even worse than they appear. A new breed of middlemen has emerged to submit claims to the IDR on behalf of providers, for which they charge a hefty fee. These payments to middlemen are not included in the costs to the health system reported above. The largest of these middlemen, HaloMD, ranked fourth in 2024 in number of IDR claims, a figure that includes claims dismissed because they were ineligible for arbitration. HaloMD claims that it earns $1 billion a year in fees and that it delivers arbitrators’ decisions that are between 8 and 9 times the QPA.
Lawsuit Further Tilts Playing Field in Favor of Providers
But still the providers were not satisfied. A lawsuit brought by a group of providers in Georgia in 2022 challenged the way the QPA is calculated. The case was decided on August 11, largely in their favor. Providers argued that the methodology used to calculate the QPA resulted in a figure that was unfairly low. At issue was the inclusion in the calculation of the QPA of placeholder procedures not typically employed as part of the service. These procedures are priced by insurance companies as low as $0. A second issue was the exclusion from the calculation of the QPA of bonus and incentive payments to in-network doctors. The government will need to develop a new methodology for calculating the QPA.
It’s unclear what effect this will have on arbitrators’ decisions. Insurance companies claim they already exclude procedures with a $0 price tag, a claim supported by research at Brown University. And it doesn’t appear that arbitrators take the QPA into consideration very often in deciding awards .Nevertheless, if the higher QPAs lead to higher payout decisions for providers, it won’t be good for insurers or for health spending. Increased costs of the No Surprises Act are likely to be passed along to consumers.
In May, the Center for Medicare and Medicaid Services (CMS) issued a rule intended to improve the IDR process. But insurers fear that the rule will only increase the number of claims by providers. They believe that more needs to be done. Patients are protected from bankruptcy-inducing bills from out-of-network providers, but providers’ demands for payment have not moderated. They have been transferred from patients to insurers. Insurers are ramping up calls for a legislative fix to the IDR process that is attracting attention from a bipartisan group of legislators.
Four years after passage of the No Surprises Act, payments to out-of-network providers continue to drive up health costs.
This first ran on CEPR.
